CMOs Can’t Defend What They Can’t Define: New Data Suggests The Struggle to Prove ROI
By Paul Hiebert
Chief marketing officers may not always like to admit it, but there’s something borderline mystical about their craft.
What, for example, makes someone who’s been perfectly happy buying her parents’ favorite pasta sauce for the past 20 years decide one day to put a rival brand in her shopping cart? What combination of factors went into her making the switch?
Did the competing pasta sauce debut a funny TV commercial? Did it introduce an unusual flavor? Offer a coupon? Did her parents say something disappointing last weekend?
In a sense, the mysterious aspect of why consumers do what they do gives CMOs some cover. They can claim credit when sales go up. They can boost their status with a LinkedIn post announcing they’ve won an award for their bold creativity.
During bad times, however, this ambiguity can work against them. Unable to explain how their ad dollars are benefiting the business, marketing budgets get slashed. Members of the board might encourage them to write the next chapter of their careers elsewhere.
There are, of course, strategies to diminish the chances of this happening.
Consider recent figures from market research firm NewtonX, which surveyed 50 CMOs at U.S. companies of various sizes across several industries in January.
When asked which departments would be among the first to see their budgets shrink if their company decides to pull back on spending this year, 66% of participants said marketing. Information technology (40%) came in second, followed by operations (26%) and human resources (26%).
Why do marketers think their work is the least difficult thing for companies to reduce in size and scope?
Their top response: “ROI on marketing can be hard to ‘prove’ or ‘define.’”
That’s a rather alarming admission. Plenty of CMOs, it seems, have trouble defending their department because they can’t demonstrate how their team generates revenue.
Procter & Gamble chief brand officer Marc Pritchard acknowledged the issue not long ago, arguing that the famous quote attributed to John Wanamaker—“Half my advertising is wasted; the trouble is, I don’t know which half”—is still valid today, more than a century after he allegedly uttered it.
Chief executives are also aware of the problem.
Last year, full-service independent ad agency Boathouse Group commissioned a survey asking CEOs to grade their CMOs on a variety of topics. Most respondents gave their top marketer a B on overall performance. More CEOs handed out Cs than As. Questions about a CMO’s ability to drive growth and translate company objectives into marketing goals also received mixed reviews.
It’s not a strong sign that marketers deserve more money and resources, especially when facing a potential recession.
Ways to resist
For CMOs willing to put up a fight, there are options.
First, experts advise marketers to think and speak like a CFO. Get comfortable with financial metrics. Embrace the jargon. Document where each ad dollar is going and be ready to answer why it’s going there.
Second, tell a compelling story based on data. Examine historical periods that resemble the present and study statistics that point to a likely future. And remember: The intended audience here is the CEO and CFO, who may not care about popular marketing KPIs, such as brand awareness or social engagement.
All that said, additional numbers from NewtonX show that while many CMOs expect economic uncertainty to continue throughout 2023, only one-third anticipate they’ll receive a smaller budget than in 2022. A quarter of marketers estimate their budget will remain about the same as last year, while 38% believe they’ll get increased funding.
“Marketing budgets are not decreasing across the board,” said William Lee, manager of strategic insights and analytics at NewtonX. “Not all CMOs are in panic mode.”
Ultimately, there are many tools and platforms to connect marketing activities with sales lift. It’s not a completely unintelligible exercise that’s all art and no science. Patterns do emerge. But the aim in defending budgets is to persuade those who control them.
Credit: Ad Week